Friday, March 1, 2013

AEE Ameren Energy Generating Bond Cusip 02360XAM9 update

This is an update on the AEE bond I have been watching. Ameren Energy owns a subsidiary known as Ameren Energy Generating Company, this subsidiary raised money through several bond issues. This bond price is volatile.

The Bond

AmerenEnergy Resources Generating Company issued this bond. The coupon is 6.3% and the maturity is April 1, 2020. The cusip for this bond is 02360XAM9.

The Payback

This bond's current yield is over 18% because there is great concern about the parent company providing the money needed to pay back the loans. Ameren Energy Generating Company, the subsidiary, does not make money. Through a complex transaction called a put option, the parent company has an opportunity to reduce their risk of having to pay back this subsidiary's debt. AEE has signaled that they would like to be done with this albatross.

The Parent Company

The parent is Ameren Energy symbol AEE. In their February financial report, the situation with this subsidiary was discussed. They are looking for sale or restructuring opportunities. Nothing in the report makes me want to sell or buy.

You cannot invest hoping that the parent company meets the obligation. It may be better for AEE to pull support for these bonds in the interest of the larger picture. In view of their dividend history (which is important for income investors to consider), I think they will manage the assets and obligations of this subsidiary in the best interest of AEE.

The Trade

For bond traders there is opportunity. Just today, March 1, 2013, according to FINRA, this bond traded between $52.737 and $55.00. In other words, you could have made over 4% in a day by buying low and selling high. Do not forget that you also get the interest for every day you own that bond.

I am an investor and not a trader, yet I can play in this market. The bond is not in default. I still get my interest every day I own it.

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Covered Call Opportunities

Square, symbol SQ, is my current favorite stock that is not a dividend machine. To turn it into an income investment, I use SQ's volatiity to buy when it dips and sell calls. See the table above. Note that this call is not included in the post published on 12/12/18 M*

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TheMoneyMadam's Story

My income investing success came from my experience managing my and other people's money since 1993. Successful income investing requires discipline. In this blog I provide specific investments based on my principles of conservative income investing. I hope to help the thousands or even millions of people who have saved and want to invest their nest eggs to retire with income that grows. M* MoneyMadam

Disclaimer

Information on this blog does not constitute investment advice. Review or mention of any stock, bond, or other investment shall not be considered a buy or sell recommendation. Everything in this blog is the opinion of the author and no warranties are expressed or implied. M*MoneyMadam.